Appeal from the Circuit Court of Du Page County. No. 96-D-238. Honorable James W. Jerz, Judge, Presiding.
The opinion of the court was delivered by: Justice Bowman
The trial court ordered defendant Elmhurst Auto Mall, Inc. (Auto Mall), to pay $38,100 to petitioner, Erika N. Chen, f/k/a Erika N. Ulner, n/k/a Erika N. Walsh (Erika), as a penalty for knowingly failing to pay over, within seven business days, child support from its employee's wages pursuant to section 35 of the Income Withholding for Support Act (Support Act) (750 ILCS 28/35 (West 2002)). On appeal, Erika argues that the trial court miscalculated the penalty owed under the statute. Auto Mall cross-appealed, arguing that it owes no penalty and that section 35 is unconstitutional. We reverse.
On July 3, 1997, the trial court entered an order for the withholding of child support (1997 support order) that required the employer of respondent, Greg Ulner (Greg), to withhold $155.57 per week from Greg's paycheck. Paragraphs five and six of the 1997 support order described the employer's duties and penalties. Paragraph five stated that the employer was required to withhold Greg's income "beginning with the first payment of income that occurs after 14 days following the date of mailing of a specially certified copy of this Order." Paragraph six stated that, if the employer willfully fails to withhold or pay over income, the court shall enter judgment and direct the issuance of an execution for the total amount that should have been withheld or paid over. Paragraph six also stated that, if the employee is denied employment, discharged, disciplined, or otherwise penalized by the employer because of the duty to withhold, the court may impose a fine of up to $200 against the employer. The employer was instructed to send withheld child support payments to the circuit clerk of Du Page County.
Greg began employment with Elmhurst Dodge, Inc. (Dodge), in early 1998. The 1997 support order was served upon Dodge on February 20, 1998, by certified mail, with proof of service filed with the court on February 25, 1998. Dodge complied with the 1997 support order during the time that Greg worked there. On June 26, 2000, Greg ended his employment at Dodge and began working for Auto Mall. Auto Mall and Dodge are both owned by Auto Nation, Inc., which owns several hundred dealerships.
Greg worked at Auto Mall in July and August 2000, was paid weekly, and received a total of eight paychecks. According to Greg, he personally served Anton Wanshek, controller at Auto Mall, a copy of the 1997 support order during an initial employee interview. Although Wanshek denied having an interview with Greg, Auto Mall withheld $155.57 from each of Greg's paychecks. The pay schedule was as follows:
July 13, 2000$155.57
July 13, 2000$155.57
July 20, 2000$155.57
July 27, 2000$157.50
August 10, 2000$155.57
August 17, 2000$155.57
August 24, 2000$155.57
September 1, 2000$155.57
(Greg received two paychecks dated July 13, 2000, because he never received a check for his first week of work at Auto Mall).
Despite the withholdings, Erika informed Greg in late July or early August 2000 that she had not received any child support checks since July 6, 2000. According to Greg, on five or six occasions he informed Wanshek and Steve Phillipos, general manager of both Dodge and Auto Mall, that child support withholdings had not been paid over.
On August 4, 2000, Erika served an order/notice to withhold income for child support (2000 support order) on Auto Mall by certified mail. The 2000 support order stated that Auto Mall "must begin withholding [$155.57] no later than the first pay period occurring 14 working days after the date of this Notice." Further, Auto Mall was required to "send the payment within 7 working days of the pay date of withholding" to the Illinois Child Support State Disbursement Unit (SDU). Paragraph seven stated that, "In Illinois you may be found liable for the total amount which you failed to withhold or pay over and fines up to $100 per day for each day after the grace period."
On October 17, 2000, Erika filed suit against Auto Mall and Dodge. In her complaint, she alleged that (1) although Auto Mall withheld income from Greg's wages, it failed to pay over the support withheld since July 6, 2000; (2) Auto Mall or Dodge owed $2,730.95 for past-due child support; and (3) Auto Mall or Dodge owed $10,000 in penalties under section 35 of the Support Act for the 100 days either or both failed to pay over income withheld from Greg's paychecks.
On January 5, 2001, Erika received from Auto Mall a check for $933.42 that was dated August 23, 2000.
On February 16, 2001, Dodge filed a motion to dismiss alleging that the penalty sought by Erika could not be enforced against Dodge since Greg ended his employment at Dodge prior to July 6, 2000, on June 26, 2000. On May 11, 2001, the trial court granted Dodge's motion and dismissed Dodge from the lawsuit.
On July 13, 2001, Erika filed a motion for leave to amend her complaint, which the trial court granted. In her amended complaint dated August 28, 2001, Erika alleged that, despite withholding $1,401.93 in child support from Greg's paychecks from July 13, 2000, to September 1, 2000, Auto Mall knowingly did not pay over any of the withheld child support to the SDU until it paid $933.42 on January 5, 2001. Erika alleged that $466.71 in child support still remained due and that Auto Mall now owed penalties totaling more than $150,000.
A bench trial commenced on January 8, 2003, and Auto Mall controller Wanshek testified as follows. From March to the beginning of July 2000, Wanshek was consulting for Auto Nation, Inc. During this time, he worked as a contract consultant for both Dodge and Auto Mall, which he testified were separate corporations with separate facilities and separate payroll systems. As a consultant from March to the beginning of July, Wanshek did not handle Dodge's payroll and had no knowledge of Greg's payroll situation or the 1997 support order.
Wanshek then became a salaried employee as controller at Auto Mall in July 2000. During the five months he worked there, "things were very chaotic." As controller, Wanshek was responsible for supervising all accounting functions and financial reporting, supervising the accounting staff, and organizing the flow of paperwork. His position also involved the preparation and distribution of paychecks. Wanshek admitted that he was responsible for preparing Greg's weekly paycheck and identifying deductions that were to be withheld.
Wanshek used Automatic Data Processing (ADP), an outside payroll service, to produce the payroll checks. Wanshek would phone in to ADP the gross totals for each employee, and then instruct ADP to make requisite deductions. Wanshek was aware that Greg was having money withheld from his paychecks in order to pay child support. Although Wanshek admitted that he relied on some type of written documentation authorizing him to deduct child support, he did not recall how he initially received this documentation. Wanshek assumed that he authorized the withholdings based on an exchange of information between Dodge and Auto Mall, since the Dodge file containing the 1997 support order would have been forwarded to Auto Mall. Contrary to Greg's testimony, Wanshek did not recall meeting with Greg for an initial employee interview. According to Wanshek, such a meeting would have been handled by Lynn Soukal, who was head of payroll at Dodge.
Wanshek instructed ADP to withhold payment of child support from Greg's checks. Wanshek testified that ADP should have remitted those payments to the circuit clerk of Du Page County as instructed by the 1997 support order. Although Wanshek became aware that the payments were not being paid over to the circuit clerk of Du Page County, he could not recall how or when. In addition, while he did not recall any specific conversation, Wanshek stated that it was "possible" that he had had one or more conversations with Greg and/or Erika regarding the matter.
Auto Mall received the August 2000 support order on August 4, 2000. Unlike the 1997 support order, which instructed payments to be paid over to the circuit clerk of Du Page County, the 2000 order directed payments to be paid over to the SDU.
On August 23, 2000, Wanshek was aware that withheld child support was not being paid over. Consequently, Wanshek prepared a $933.42 check, payable to the circuit clerk of Du Page County, for Greg's child support. The check reflected six weeks of withholding. Wanshek admitted that he was responsible for making sure the check got sent, and he assumed that he gave it to one of his staff members. Wanshek was also responsible for reconciling the account from which the check was drawn. However, the "volume was too great" and there were not "enough resources to have those things completed in a timely manner." Wanshek never confirmed whether the check was received, and it was stipulated that the SDU did not receive the check until January 5, 2001.
Greg received two paychecks from Auto Mall after Wanshek prepared the August 23 check. Wanshek testified that because he was aware that past withholdings had not been paid over, it was his responsibility to make sure that the withholdings from the last two checks were paid over to the SDU. However, it was stipulated that $311.54 in child support from Greg's two paychecks, dated August 24, 2000, and September 1, 2000, was not paid over to the SDU until October 2, 2001. Wanshek had no knowledge of the October 2 check since he left Auto Mall in December 2000.
Erika testified that child support payments were timely when Greg was employed at Dodge. However, from the end of June 2000 to the end of August 2000, she did not receive support. Erika testified that, in approximately August 2000, she called Auto Mall more than twice and advised a manager named Chris that she was not receiving child support.
Lynn Soukal testified that she was employed as human resource (HR) and payroll manager at Dodge. She began the HR position in February 2000, and the payroll position in April 2001. Wanshek stopped working at Auto Mall in December 2000, and Soukal was asked to go to Auto Mall to pick up some HR files. In a plastic folder located on the side of Wanshek's desk, she happened to find the $933.42 check. After consulting her supervisor, she was advised to mail the check out. Soukal mailed the check near the end of December 2000.
The trial court made the following conclusions of law and findings of fact. Greg transferred his employment from Dodge to Auto Mall in July 2000. Although related, these corporations were separate and maintained separate accounting systems. At Auto Mall, Greg met with Wanshek and gave him a copy of the 1997 support order. However, the 2000 support order was not served on Auto Mall until August 4, 2000. Because the 1997 support order provided notice of the $200 penalty, but not the $100-per-day penalty, the court determined that the $100-per-day penalty could not be assessed on Greg's first four paychecks, dated July 13 through July 27. In reaching this conclusion, the court relied on section 20 of the Support Act (750 ILCS 28/20(7) (West 2002)), which requires that a support order shall "state the duties of the payor and the fines and penalties for failure to withhold and pay over income." Following Auto Mall's receipt of the 2000 support order, Greg received three more paychecks where child support was withheld but not paid over within the seven working days. The court found that Auto Mall knowingly failed to pay over the amounts withheld from these checks. In particular, the court noted:
"Mr. Wanshek acknowledged that, at some point, he became aware that money was being withheld from [Greg's] paycheck but not being paid over. And he identified a check that he wrote at the end of August for the amount of the accumulated child support. He testified that he thought this check had been mailed. In fact, however, it ...